A New Year’s Resolution for Chemicals – Embrace Digitalization

With ongoing uncertainty about what digitalization could mean for the chemicals industry, we offer 5 practical ways to help you keep this resolution, deal with the unknown and stay ahead in 2018.

With the rise of technologies like the Block Chain, digitalization is challenging companies to think in new and unexplored ways to stay ahead. But will this disrupt years of industry knowledge and best practice in supply chains? Is ignoring digitalization an option? And what does this mean for you in 2018? Recent developments suggest that encouraging your organisation to think and connect differently with these questions in mind, could be the best way to overcome the uncertainty, future-proof your position and meet your immediate goals.

Here are 5 steps you can start taking today to ensure you don’t get left behind in the digitalization race.

Don’t throw the [systems and standards] baby out with the non-digital bathwater

The 1980s and 1990s saw heavy investment in the development of the systems and standards that have now come to characterize the chemical industry. It is unlikely that these companies are going to drop these assets suddenly with the emergence of digitalisation; nor should they. The economies of scale and other advantages acquired from these investments still generate value, so it is important that companies seek out providers or partners who can integrate the old with the new as they start their transformation journey.

But even with the “right” provider, companies will still face a period of transition as their employees, suppliers and other stakeholders adapt to new ways of doing business. Getting this transition period right will be critical which is why it is also important to work with providers who are willing to adapt with you.

We estimate it will take 3-5 years for chemical companies to complete the required transformation. But it could take an additional 3-5 years before the industry itself gets started on the transformational journey towards full digitalization. That leaves us with a best-case scenario of just 6-10 years to complete the transformation.

Learn from the new kids

So, what is the best way to prepare? The chemicals industry remains one of the most conservative and in some respects, most stable industries. And, large-scale change is not necessarily swift. The considered approach that chemical companies apply to decision making and adaptation can even appear risk averse at times. In this context, it is understandable that digitalization is not something the industry has rushed to embrace.

Many of the spin-offs and start-ups that have flourished in this space will inevitably be ahead of the curve in terms of responding to shifts in the industry. The speed of change has been rapid with some industries being disrupted – as with the rise of Amazon for example – and others being attacked, as “disruptors” enter supply chains. The lean, cost-effective practices that these companies have adopted present two areas that the larger players can learn from when it comes to future-proofing themselves.

Get connected personally, not just digitally

The transformation journey is as much about the changes that will need to happen with your organisation as it is the changes that will need to take place within its employees. And, as companies learn from the new kids, we are likely to see experience colleagues being brought in from many different industries.

As the educational foundations of many employees in the industry have barely changed in the past 2 decades, this injection of new knowledge and experience could be extremely valuable. More importantly, it presents organizations with a ready-made opportunity to absorb this knowledge at multiple levels.

Ensuring that your organisation connects on a personal basis across its departments, hierarchies, operations and geographies is an obvious, simple and effective tactic here. Yet, it remains one of the most overlooked and under-utilized tactics in many organizations today.

Involve the whole organization, not just management

The impending changes are set to affect not only the way companies position themselves, but also the workspaces and practices of everyone within them.

While it is imperative to have senior management endorsement and leadership on change, we should realize that the effects of digitalisation will be felt at all levels. From the tasks performed and the people performing them, to the educational programs that will be required and how succession planning is conducted, almost every aspect of working life will be touched.

There is a clear task for leadership however. Creating the conditions that will encourage, engage, and motivate employees to prepare for change is key. Having professional coaches on hand, organizing Town Hall meetings and even introducing part-time study options are just a few of the practical steps that can be taken. Steps that can help build trust between the various levels of the company and reduce feelings of uncertainty.

Embrace the unpredictable

During the 1970s and 1980s, development within the chemicals industry typically ran in 5 to 15-year cycles. Today, that has been reduced by almost a two-thirds and the cycle lies at around 1-4 years. That marks a huge departure for an ostensibly stable industry. So the prospect of working within an additionally unpredictable context such as digitalization has implications for the degree of control organizations feel they will either gain or lose as a result.

But when the alternative for companies is to find themselves behind the digitalization curve within 6-10 years, the option to ignore the associated changes is unrealistic at best.

In her keynote speech at EPCA 2017 this year, Professor Ann Vereecke, Partner and Faculty Dean of Belgium’s Vlerick Business School noted that companies in the petrochemical industry are only likely to react once affected by the consequences of digitalization. In my opinion, that may already be too late especially if the rest of the supply chain has already started the journey.

So, what conclusion can we draw from all of this? In my view, even though the need to be prepared may not be clear today, it will become essential if you want to secure a good starting position in the digitalization race that will probably follow. By taking the 5 steps outlined here, you will be giving yourself and your organization the best possible chance of winning…before consequences hit.

For more information on digitalization and how we are helping the petrochemicals industry stay ahead, contact me at here or go to www.damco.com.

Daniel Weissenberger is a Global Account Director in Damco’s Chemicals Vertical where he is also the focal contact for all strategic and commercial supply chain aspects at Damco’s key chemicals guild. Daniel joined Damco in October 2016 as Strategic Sales Director for Europe where he consulted and supported Industry Leaders in their transformation journeys towards digital supply chain solutions.
Daniel has extensive experience in freight forwarding having held account management and vertical positions at Panalpina, Maersk and P&O Nedlloyd. He also has wide-ranging knowledge of current supply chain challenges and future developments in the chemical and pharmaceutical Industry. Daniel holds a Bachelor degree in Business Administration and a Master degree in Logistics and Supply Chain Management.

One Response so far.

“There is a clear task for leadership however. Creating the conditions that will encourage, engage, and motivate employees to prepare for change is key.” This is an important point. If you don’t have full buy-in from leadership, how can you expect other employees to embrace change?

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